It's already 2024—can you still start a business in NFT digital collectibles?
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It's already 2024—can you still start a business in NFT digital collectibles?
There is still significant market potential for compliance projects.
Navigating Web3 tides with focused insightsBy Liu Honglin, ManQin Law Firm
A couple of days ago, two seasoned practitioners with years of experience in China’s NFT digital collectibles industry visited ManQin Law Firm for an exchange. They shared many incredible stories from their journey over the past two to three years and discussed various issues that platforms and entrepreneurs care about—many of which reflect the confusion faced by those looking to start businesses in the NFT space amid current regulatory uncertainty.
With the intention of contributing positively to the industry, ManQin Law Firm has compiled and anonymized the key points from Attorney Liu Honglin’s discussion, hoping to offer some insights and inspiration to fellow entrepreneurs in this field.
The Current State and Policies of China's NFT Industry
First, a common concern: Does the Chinese government currently allow the development of NFT digital collectibles?
Many entrepreneurs worry whether their projects might be deemed illegal or even expose them to criminal liability. However, according to Attorney Liu, from a legal standpoint, there is no explicit national ban on NFT digital collectibles. Neither two years ago nor today in 2024 has the central government issued any policy restricting the development or sale of NFTs, nor has it released any document denying their market value.
On the contrary, certain local governments have introduced supportive measures. Take Shanghai, for example—recently released policies over the past two months have provided support for blockchain-related enterprises. This indicates that while certain practices under the name of NFT may be sensitive from a regulatory perspective, it doesn't mean there's no commercial viability. In fact, commercial experiments that integrate NFTs with real industries and the digital economy may even align with policy encouragement. That said, entrepreneurs should note that the NFT sector remains relatively nascent; regulatory silence does not equate to zero risk.
The Relationship Between NFTs and Digital E-commerce
From my personal view as Attorney Liu, I suggest that entrepreneurs treat NFT digital collectibles as the next generation of digital e-commerce.
Compared to framing NFTs around decentralization or asserting that assets truly belong to users—concepts often tied to cryptocurrency—the idea can feel abstract. For the general public and consumers, understanding NFTs as virtual goods is more practical. For instance, purchasing an NFT digital collectible—whether it's a piece of digital art or a virtual souvenir—is fundamentally no different from buying a QQ avatar skin or a virtual game item online. All are forms of virtual commodity transactions conducted via digital platforms.
Some may argue that legislation for China’s NFT industry is incomplete and hope for dedicated laws in the future. But I believe that’s unnecessary. The reason is simple: existing legal frameworks are already quite comprehensive. Nearly every issue encountered in this industry today is already addressed either in the Civil Code or the Criminal Law. Regulators are unlikely to create special legislation solely for NFT technology. The core focus of the law remains on transactional and consumer behaviors. Just as buying a game skin rarely raises unique legal concerns, the same logic applies to NFT purchases. Entrepreneurs should regard NFTs as part of internet-based e-commerce, not as a separate, exceptional category. By strictly adhering to standard e-commerce compliance requirements—such as consumer rights protection and advertising regulations—businesses can significantly reduce legal risks.
Trend in Legal Disputes: Rise in Civil Cases
In recent years, disputes related to NFTs have indeed increased, particularly cases involving intellectual property infringement and consumer contract disputes. While earlier concerns centered on platform exit scams and consumer fraud, the growing number of litigation cases reveals that consumer rights protection is becoming a focal point. This indirectly shows that NFTs are increasingly being treated as conventional virtual property, and the legal environment is gradually becoming standardized.
However, entrepreneurs must also recognize that due to the intangible nature of NFTs, certain risks are inherently higher. Some platforms exploit the virtual characteristics of NFTs for misleading marketing or infringing activities. To avoid such legal issues, companies must strengthen compliance during operations—especially regarding transaction transparency, fund security, and user data protection.
Legal Risks of "One-Yuan Purchase" and Battle Royale Models
Within the industry, certain once-popular models like the “one-yuan purchase” or “battle royale” mechanics are, from our perspective, classic high-risk business strategies. These models aren’t inherently illegal, but they easily cross legal red lines.
Many platforms use one-yuan purchase schemes, allowing users to draw high-value NFT collectibles at extremely low prices. The risk escalates significantly when platforms facilitate two-way conversion between fiat currency and virtual assets. For example, if users buy platform chips with RMB, use them to draw NFTs, and then the platform (or a partnered third party) enables cash-out services, improper operation could lead to allegations of operating an illegal gambling platform under criminal law. Therefore, I strongly advise thoroughly assessing legal compliance risks before adopting such models to avoid falling into legal trouble due to oversight.
The Importance of Choosing the Right Company Registration Location
For today’s NFT digital collectibles entrepreneurs, selecting the right location for company registration is crucial. Many companies previously chose Hainan or Chengdu to leverage regional policy incentives. However, as local policies tighten, numerous firms are relocating. In contrast, cities like Shanghai, Shenzhen, and Hangzhou—with their dense clusters of internet companies and regulators who are more familiar with emerging technologies—offer a more favorable policy and enforcement environment for NFT businesses.
For example, Shanghai not only has open blockchain policies but also courts with greater understanding of blockchain technology, which benefits entrepreneurs in resolving legal disputes. Such geographic differences directly affect the legal and policy landscape entrepreneurs face. Choosing the right location can help companies mitigate risks from policy shifts and gain better growth opportunities.
Moreover, maintaining good relations with local regulators and avoiding negative social impact is another critical factor. We’ve seen many companies generate significant online controversy yet avoid administrative penalties or adverse legal consequences—often because they proactively communicate with regulators, respond swiftly to user complaints, and resolve issues through negotiation or settlement, thereby reducing the burden on regulatory bodies. Maintaining positive engagement with regulators is essential—not just for long-term business sustainability, but also for minimizing legal exposure. For entrepreneurs, this is a long-term strategy requiring continuous compliance awareness and avoidance of regulatory red lines throughout operations.
ManQin Lawyer Summary
NFT entrepreneurs still have viable opportunities within the current legal and policy environment. In fact, with proper attention to compliance, substantial market potential remains. The key is not to be swayed by short-term market hype—especially when designing platform models—and to maintain a clear sense of legal risk prevention.
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